good morning. it's a deal worthy of a post-it note. office max and office depot

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merge. hacking america, a secret military unit is said to be behind a series of attacks, but our friend, china, denying the reports. and countering it was the victim of u.s. hacking. and the bulls are back from a three-day weekend. can the s&p 500 post an eighth straight week of gains? we've got four days to find out. it's tuesday, february 19th, 2013. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin who is back from vacation. let's get started with the markets. as joe mentioned, the s&p winning streak has been a strong one. in the meantime, the dow is coming off a second straight weekly loss. although, really, if you looked at this last week, it was the ever so slightest of losses. u.s. equity futures are

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indicated higher. dow up by 21 points. s&p is up by two points above value fair and the nasdaq is up about 3. in 20 minutes, we'll turn to predictions on where the markets go from here. then in the next hour, delivering alpo. we'll talk to the manager of a $11.5 billion hedge fund. this fund was up 30% last year. don't miss pine river's ceo brian taylor. on our radar this morning, we have earnings and the economy. the national home of home builders releases its numbers for fen. after the bell, you have dell that's going to be a focus. the company in the middle of a buyout battle. it's going to be posting quarterly results after the close. our guest hoefs host this morning is sure to have an opinion on all these stories and many others, as well. the always forthcoming ken langone will be joining us on set starting at 7:00 eastern as

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our guest host for two hours. squawk will be hopping behind the wheel this morning. a week ago, there was a huge controversy that erupted over the tells sla. today our own phil lebeau will be taking the vehicle to boston. we'll get to all this in just a moment. andrew has the morning's top headlines. welcome back. >> thank you, becky. let's talk about the big headlines this morning. the office depot is in talk toes merge with smaller rival office max. expected to be a stock for stokz transaction. the deal could come as early as this week. kayla tousche will be joining us to talk about it. also, a dreamliner 787 was forced to make a emergency

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landing last month. the yet flown by all nippon airways was forced to land after it failed. the carnival krooud cruise ship triumph said a diesel line was touch ago hot surface and caught fire apparently. the investigation into the incident is likely to take as much as six months. we'll likely hear more about that. in tech news, oral arguments are set to begin between david even owner and apple. he wants a judge to block apple's ability to issue preferred shares. >> we work that if the distributed preferred stock was,

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say, a 4% yield there would be a stable demand. shareholders that want to own apple for the up side in the operations would continue to simply own the comment. they will take a lot of money to the preferreds. >> "the wall street journal" says the company has been investing heavily to allow technology to improve the experience of playing the new console. it's expected to allow users to connect to facebook, twitter, or youtube fairly easily. and microsoft has officially launching outlook.com. if company will upgrait grade every hotmail user to the service. microsoft is financing the biggest in the history of the e-mail, financing 30 million to 90 million on the outlook campaign. and the "wall street journal" reports that google may not open retail stores this year. reports at the end of last week

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suggested that the search giant might launch its first retail presence this summer. i have no idea what they would sell. >> devices. phones. >> because you can't -- what i use google for, i don't need to go -- right? >> if you have an android phone. >> don't talk to me about smartphones. >> i happen, mr. i love the ipho iphone. >> you have so behind the times. >> you've had the iphone for, what, four days, five? and now you are -- >> you've got the blunt instrument. it's so backwards. >> you're waiting for the blackberry ten, right? >> i don't know what i'm waiting for. >> i heard on friday, i saw the -- >> do you need to know any of the nations ski resorts that got more than 2 inches of snow last night? >> no, but -- >> he has an app for that.

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>> what are you going to do, drop everything and go skiing when you hear the report? i need to know some of these things. i knew on sunday morning that both beaver creek got 7 inches and snow map. i have weather in every place that i might even think about visiting. i have ncaa basketball scores scrolling as they're happening. i know who is playing today. i can get a preview of what's playing. it's a different world. i was just reading about how could they do something with just e-mail. who just considers e-mail as the only thing that they do? and i was reading about you. >> no, it's not. i realize it. i have an ipad. i have all the apps on that. >> listen, the iphone, when you're doing it, you press three letters and it knows the word you're looking for. >> you are the greatest spokesman for apple. >> fantastic.

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i feel like a whole revolution -- >> you are not a -- >> since i left on friday. >> office max and office depot, there's still like 2600 of those stores around and there's staples and amazon and i've never gone in. why do we need four different place toes buy supplies? >> staples is fun, but what are these other two also ran? sth knot a merger of, like, growth, wow, things are good. >> no. this is like, oh, i'm drowning, help me. >> i wasn't here when einhorn came on. >> what's happened, briefly, is apple -- david went to apple six months, eight months ago and said you should issue these preferred shares. >> right. >> apple not only said no, apple

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said, you know what? we're going to put in our proxy as part of a governance package that we will never be able to issue these types of preferreded. >> twout the shareholders -- >> no, no, no, never be able to do it again. >> i thought the vote was they have to do more. >> but it's not to say we will shares again.ssued preferred >> my understanding is it would preclude the board from issuing preferred shares. >> without the approval of the shareholders, i thought. >> i have to go back and look. i'm not sure that's the case. but it could be. now you stumped me and it -- >> that was my understanding from what i read. >> what he's arguing is there shouldn't be this provision and that the board should be allowed -- >> do you guys have questions about apple? because i have an iphone now.

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>> and you are the expert auto all things. >> china is our friend. they would like to shut down our grid, but they're our friend. >> i'm going to sound like a traitor for saying this. they came back and said it was our fault. >> this is not the first time you've been sounding like a traitor the. >> they came back and said we're the biggest threat to them. >> north korea is the -- >> i bet we spy on them. >> of course we do. i hope so. we're not hacking into them. why would we get all our stuff? who would bhie our bonds? >> but this they're not shut it down. the scary mrilt guys. >> sth t story on the front page of the new times.

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>>? >> fwaus the "new york times" has been hacked by these guys. they don't like their coverage. >> no, when it happens to them, they finally get mad. >> it's a good story, all the cyber wars that are taking place. check it out this morning. >> that's an amazing story on the front page. >> it is. >> does anyone else have it? >> no. >> they can do good work. we're going to solve our income disparity in one fell swoop. >> you don't have to solve everything. sometimes it's to make you think. >> stls another story from the "new york times" that is the reason why we're doing the story i'm talking about right now, phil lebeau is in washington this morning. he has his coffee and is he's ready for his trip to boston today in a tesla.

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this is a story that came about because of a huge controversy taking this very same trip that you're about to embark on. >> we're going to do the exact same route, buckeye, and we're going to stop in delaware, in new york, dare, about 170 miles away. then we'll stop in milford, connecticut, and ultimately just outside of boston. that's the route we'll be taking today. it was the same route that john broader for the "new york times" did because he said his tesla stalled, it came out of power. then it was said, wait a minute, you didn't follow a lot instructions in toerms of charging it up all the way. so we want to give you a send.

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the range, 2670 miles. and we expect we're going to be able to make it there no problem to our first stop. again, this is going to be in new york, delaware. a little bit later on during "squawk box," you will hear from us. and by the way, we are going to be live the whole way right here on cnbc. we're going to take you up to pill ford and we'll give you a sense of what it's like. kwel snow i live. we'll check in periodically live on the road. for now, we're going to send it back to you. i. >> phil, what is the temperature there? the big issue with the "new york times" story was the temperature. in the meantime, do you know how warm or cold it is?

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>> you know what? before i left the hotel this morning, i checked and i thought it wag something like 45 to 48 degrees here. it's cool for washington, d.c. >> but it is definitely not -- >> he's out of the range of our truck so to speak. >> wait a second. i'm not allowed to talk on my cell phone while i'm talk driving, but phil can talk live and do a report with the cameraman sfp. >> yeah. he looked okay, but it must be a big roomny model. >> seven hours, 36 minutes. that's going to get him times this afternoon. >> he could make it faster in ra tesla. >> you don't want to speed in a tesla because that drains the battery faster. >> that was part of the problem,

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apparently. >> but you use more gas when you speed, too. that doesn't mean you're not going to speed, does it? >> that's true, but this is an ourselves -- there's no battery. you're not going anywhere. >> why build a car that can go that fast if you're not allowed to drive it that fast? >> that's true, too. let's check on the markets this morning. the futures are indicated higher. last week, the s&p was up again. this is the first time since 1960 something snap the s&p has been up for the first seven weeks in a row. oil prices have been ticking steadily higher at the bump. this morning, oil prices are up to $95.43. the ten-year note is 1.997%. that's where it's been for several weeks at this point. the dollar is up against the

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euro. it is down against the yet at 93.53. it was the biggest drop we've seen in over three months. this morning, up 1 $.90. $1,611.40. and now it's time for the global market reports. kelly evans is standing by in europe. >> the main thing people on this side of the pond are talking about are the italian elections. they happen on sunday. today, though, a pretty good example of the broader paradox which europe is facing. the zew index jumped to a three-year high. that sparked the markets higher, up 0.7%. the ibex doing okay with giving up some ground. a strong session in paris and reasonably strong for the ftse,

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as well. it's a bit of a paradox, this comes at the same time that we learned european car registrations, guys, in january hit a fresh all-time low. tan lists are jpmorgan point out it's 25% below the annualized pace in the kwourth quarter in january. markets like france are seeing car registrations dune an annual 30% for january. not a good sign for manufacturers. nevertheless, stocks power higher. they think perhaps the worst is wind. quick look at the bond space because spain did go to auction with thee months and nine-yield papers. when you guys were away for the session yesterday, it was so quiet over here. not a lot of trading activity. people are waiting on the outcome of sunday's election in italy. i want to leave but a look at what's happening. the euro/dollar is rallying on

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the back of that news on the zew survey. now it's giving up 0.1%. it's changed its mind. that's all right. those events people are waiting to get a firmer read of and more clarity, i should say, on just how strong european demand really is coming back through to the other side. i won't mention the yen. there's a special present for joe this morning. back over to you guys. >> okay, kelly, we were just talking about all the things happening, the mannettary movement, and i'm trying to tie it to co2 levels. it's more than a questions dense, andrew. >> 2036 and 2040. >> but once in a hundred years a meteor -- it has to be co2. i'm telling pup. >> he's being facetious. >> i don't think it's a coincidence, all these weather,

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all these storms, comments, meteorites? >> right. but it is scary. if you want to nudge it away from us, you have to start earlier. >> who knew there were people inside siberia? >> and it fell into a big lake, right? >> spikin shakespeare's days, y would see it coming. inge al gore does every single thing. coming up, the s&p 500 takes aim at the eighth straight week and the stories likely to make or mistake the bull case. that's coming up. we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus.

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welcome back, everybody, on this thus morning. the first trading day of the week. u.s. equity futures are indicated slightly higher across the board. dow features up by about 21 points above have a fair value. the s&p up by 2 and the nasdaq up 3. let's get to the national weather channel forecast from eric fisher. good morning, eric. >> good morning, everybody. we have very active weather might be affecting travel today around chicagoland. we have snow come down this morning, reaching down from green bay towards chicago. the big story here, though, is the cold and the wind.

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that's starting to pick up pt ont front end, wintry mikts across pennsylvania, new york state here. not a lot of snow out of this one. a lot of this reaches the philadelphia/d.c. car door late morning into the afternoon. the good news for this, a quick hitter. we're watching all this track its way over to the northeast. same story for boston. a lot of folks still doing that. a lot of school vacation this week. the snow is going to fall, not rain. it won't contaminate the slopes. and the cold air moves in behind all of this. >> look at the changes here across the midwest. 25 degrees colder than this time yesterday in minneapolis. 25 degrees warm ner columbus, ohio. the cold is what's moving in here. dangerous windchills, 15 the below sfee row in the twin citys, 1 is in chicago and 13 in indianapolis. lots of layers for all the kids who are going back to school

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today. then we catch our next storm, this little pin wheel around the oregon coast. this will dive down around california today and is be a pretty big snowmaker. coast to coast, 6 to 12 inches in the snowfall mountains. plenty of snow here around the wasatch. these amounts in the appalachians, on the order of 1 to 3 inches today 37 back to you guys. >> beck can he can't believe what she just heard about that cold weather. eric, they're melg me, you didn't know it was 25 degrees. >> it's warmed up in minneapolis since earlier today. >> such balmy weather. >> it's like, i've known this, right? >> we're here to educate. >> eric, i rely on the weather channel. tell us something, andrew --

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>> he did. he just told me it's 2:22 in nairobi. >> you need singapore time? >> you know what else? the clock when you put them all in, andrew, am i right? if it's nice, the clocks are dark. if it's daytime -- >> you guys are going to completely browbeat me into following along and getting an iphone. >> i think a five is the best. i have a five. >> i have -- >> you don't have a five, do you? >> i have five i pads. i use the ipad. >> but why not have it on your phone? >> because i can have that and the one thing. >> it's prehistoric for some reason. >> 90% of our audience has an u phone. >> i'm going to get a metal driver, too. >> it's a short week for the markets. plenty of economic data and

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earnings reports for investors to watch. joig us is chris johnson, director of research at jk investment group. that could be my company and rich steinberg of global asset management. i'm going to start with you, chris. you're fully predicting we need some type of correction at some point because we're priced for perfection or the economy is sloeg or -- >> exactly. >> what's your rationale? >> well, we always talk about records being broken right before we turn the other way, right? and the s&p has been going straight up. it's just that investor sentiment has swung over to that extreme. they were 2 1/2 times mover bulls than bears according to investors intelligence last week. typically, these are those periods where it's marked to be raising some cash, put something money on the sidelines because

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we see a healthy correction. you know, if we were in a bearish trend right now, a long-term bearish trend, we would call it a continuation. right in in this particular situation, it's a healthy correction. we need it and then we can pop even higher, i believe. >> healthy sounds big. you like cathartic? >> no. >> you mean a healthy one that would help make us healthier? >> exactly. you want people to get that sense that it's not easy money. i can remember coming to new york city and buying in the studio with you guys back in early 2000. i would get in the cab and the cabby would be telling me what tech stocks i want to buy just before everything went south. some our smaller trend we're getting ahead of ourselves. on march 1st, we have that deadline here. i think that will be the catalyst right now.

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i think you're looking around in the 5% range here pb that will be healthy, 5% to 10%. >> how about you, rich? do you agree or do you have a different number? >> i think we're getting close to full value. earnings are coming in better than expected. two-thirds of companies reported sales. and i don't think this is the 2000 period where everybody is talking about stocks, joe. if we get past the sequester issues with sdwb either with a little bit of a pullback, not the 5% to 10% that the other guest is looking for, the markets are going to have to work higher. there's no other place to put your money right now. the 2% ten-year note doesn't have the competition when the s&p is yielding 2%. so we're still very constructive. and if earnings continue to come

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in better, we're going to have to raise our target. even though we may be a value in the short run, i still think stocks are the place to be and it's not a frothy market at all. >> because it's hard to get a return anywhere else. but, rich, what is your viewpoint on gdp this year? >> we're at roughly between 1.5% and 2%. >> and you don't think the markets are -- so that doesn't matter? the market is -- it's just based on relative return elsewhere and just the bond market not doing anything? so you figure -- i mean, 1 .5% to 2%, that's barely above no growth at all. >> yeah, but 8% year over -- this year's earnings, joe, is 8% year over year growth in earnings as interest rates have come down. it's given companies a continued chance to lower their interest rate expense. and demand is coming back. even though the overall economy may be only growing sluggishly,

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ennings growth does look decent with $110 in earnings for next year. >> do you care about any of this, chris? >> absolutely. you know, we want to see continued fundamental improvement. one of the big things that rick mentioned is that money that's sitting in bonds when you look back at the bond flows in 2012. it was off the chart in terms of people putting money to work in bonds. i think that money has to find another home, joe, as we work our way through 2013. the longer term bullish case i think is still in effect here. it's just, as i mentioned, i think we want to see a healthy correction. let's face it, that's the way a lot of these portfolio managers create that outflow. we balancing. >> you sound more technical. i'm seeing this, marty's wife died. did you see that? >> oh, that's too bad. >> he was only 70 or 71. he was a huge deal in everything. especially he was a great

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technician. on the show a lot, marty was on "squawk box" a lot. this is just -- i didn't have any idea he was ill or anything else. 70 or 71. i'm looking at a wire report. but he had a long career and, you know, credited with somewhat predicting the 1987 market. he was very smart and well spoken and we knew him pretty well. sad news. chris johnson and rich steinberg, thank you, we appreciate it. i thought i would bring that up because he's such a great tech nirnan. >> more and more people, zarelli, him, a lot of people -- but i guess -- >> no, my understanding is that was his -- >> one of his claims to fame. >> in the meantime, come up, we have reports that china is behind the attacks hacking into

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a secretive chinese military unit is believes to be wind a series of hacking attacks according to a report by u.s. computer security company mandia this. the company believes the chinese urchbt carried out a sustained attack on a wide range of industries. the comments are prompting a strong denial by china and they would never lie, i don't think. and accusations that it was, in fact, the victim of us hacking. and i'm old on this -- on time, the asteroid and the meteors to what is obviously co2. a cnn anchor asked on saturday,

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she was going to interview bill nye, the science guy, and said going to break said, it's going to pass by there, is this an example of, perhaps, another manifestation of global warming and what man has done to this planet environmentally, globalization and all the other stuff that we don't like and we're worried about? but i guess bill nye failed to confirmed. i don't think he'd dispute it, that it's a possibility that carbon or carbon dioxide was partially responsible, but she didn't get the answer she was looking for. >> what am i supposed to say to that? >> well, i don't know. can you confirm that it was definitely co2? >> i cannot. >> i'm sorry, i should say carbon because co2 is clear and plants breathe it. i should say carbon. carbon is what we call it, right? >> there is another hacking

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scandal. >> there is. >> burger king wag forced to take down its twitter account after it was hacked yesterday. they spelledcdsam incorrec other tweet tnished burger ki and its eloyees. some of them i think were se dirty words that were rown out there. mcdonald's said it has nothing to do with this. >> and in other news, the justice department is working on a new and different technique to go after wall street banks. the "new york times" has been protests, reported on a new model for prosecuting big banks. the government now is recently pushing for guilty pleas rather than just the usual fines and refo reforms. people say i neither admit nor deny. now they're saying we want you to be guilty. >> that's the problem, right? because it opens them up to their losses. >> so here is what is happening. they are now said to want to apply this approach broadly to financial fraud cases. now they're going to change what

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they're doing. lawyers for several big banks tell the times they're adjusting their defenses and urging banks to fire employees suspected of wrongdoing in hopes of confusing authorities. so far, the doj has extracted guilty pleas from remote subsidiaries of big, foreign banks. in the past, authorities have avoided pursuing guilty pleas over fears that they would destroy the bank. it was like, if you indict the bank, then it could hurt the bank, it could hurt the broader economy. but now the government is going after bank subsidiaries so it doesn't i diet the entire firm. the question, can you can you do that -- >> can banks keep employees that they thought was guilty? >> yes, in fact, you remember fabrice from the -- well, he was concept on the payroll so fo

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them on them. if there's a sibsiary where they can force the problem. >> it's different than the other torey, right? >> on msnbc, yes. it's not the same guy. >> no. >> just checking. >> i'm not sure if fabrice is a toret or a tore. >> yeah, you don't know. you have to be sure because toret is that other guy, in my mind. >> and he has one name. >> which is cool. sorkin. no, they say sorkin and it's that other guy. i read something that someone was channeling -- oh, i remember. the president said it's easy for him to get roser for michelle because he has a rose garden and

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that's exactly what michael doul douglas said in the american president, which was a sorkin movie. and he said that -- he didn't say it, but someone noted that -- >> he couldn't get flowers and he said that he -- i finally said, oh, i forgot, i have a garden. i have my own rose garden. >> but it's from a sorkin movie and i immediately thought, too big to fail. >> i love when i get e-mails from people who say, you do this show, he write about finance and you where he these movies? how does that happen? >> you don't want to be a retab coke guy. >> are you related 12347. >> we were not related, but i consider him in the family, if you will. >> why? you've dated maureen dow? bp is getting set for a trial over liability for the deep water wohorizon disaster. the trial will combine hundreds of similar claims against bp,

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transocean and halliburton. the a judge will determine whether the company's culpa bblt is legitimate and the lowest possible penalty is very well below the 5 billion to 22 billion that the market seems to be expecting. but a settlement is still deemed possible. when we come back, the s&p has an opening here with seven straight weekly gains since 1967. and i believe that was the first time it had ever done that. of course, now it is breaking that record once again. we're going to head to the futures pits and check in with kevin ferry right after this. and don't forget to stay connected to squawk. find us online and on mobile, as well. follow us on twitter,@squawkcnbc is our handle. like us on facebook and visit our show page. ♪

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welcome back. 6:43. who is this guy? ken langone. you're here, we should put you on. u.s. equity futures indicated up about 15 points. making headlines, nestle has remofld some beef pasta meals from sale in italy and spain after the company found traces of my friend flicka in the meat. apparently there was some horse -- traces of horse dna. apparently there are places that love horse and it supposedly is pretty good, andrew. >> yuck. >> i made that joke about kfc. >> well, that was bad. >> cow res nice. have you ever -- we don't ride

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them. >> i'm not eating -- i mean, i'm not eating horses and i'm not eating dogs. >> you eat kout cows. >> but it's culturally what you grow up with. >> the discovery of horse meat in products labeled at beef has spread across europe since last month. just last week, nestle said its products had not been affected by the scandal. but why -- you act like it's gross. >> it is. because it's mislabelling. if you think there's -- it is. you can't call it beef and have it be horse meat. what if you found out it was dog. >> we don't eat dog. >> but if you were eating something that you thought was a hamburger and found out later, that's the problem. mislabelling because we all have our -- >> how about rabbit?

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>> i don't care for rabbit. >> buffalo? >> i've had buffalo. >> deer? >> though. >> squirrel 12347. >> no. >> you ever been to greco's barbecue? >> let's get a quick check on the markets right now. have you ever had squirrel, seriously? >> no. you get treons in squirrel. you can. i'm not kidding. >> why? >> because they eat each other, i think. you've got a pretty mouth, andrew. anyway -- >> kevin ferry joins us now. >> so does kevin. >> kevin, we've been watching what's been happening with the markets and now you do have the s&p up for seven weeks in a row. that hasn't happened since like 1963 or something. what does this tell us? >> it's a hot start, right? i think, you know, last week, we talked, everybody is going about the currency trading. so let's see if we get anything coming back to the bond and the equity markets this week. there's -- we're going to get some inflation information and i

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think that the real thing that trader res watching here, becky, is that there's this very easily told story that people are rotating out of bonds and into stocks. and there's just no evidence of it. in fact, the corporate markets, the leverage market, the high yield market is still very robust on the supply side. and that's helping the port for seven weeks in the equity market. >> so this is just new money that's coming in from the sidelines, not any rotation? >> well, it might be rotating inside, but the fact -- you know, these materials do with getting done easily at low spreads and low yields and so someone is buying all these bonds. they're just not -- you know, the fact that they're rotating out is just an easily sold idea or maybe something that people think should happen. but what i'm saying is that we've left the crisis stage. this is the machinery of wall street back at work. and it's even on a global scale. so i think that -- last night you saw as europe came back, our

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market firmed up a little bit. so i think you're watching that. but where people have been told to put their money is emerging markets and we're starting to see some cracks over there. mexico we saw it and the hang seng you saw got hit last night. >> did junk bounce, kevin, from that support level? >> yes. >> it did. >> and you've got some big deals out there, joe. i think in the past week, even yesterday, you saw some fairly good deals in europe that came, you know, and i think bill gross said the same thing you said. >> low yield. >> none of the money is coming out of bonds. and it's different money going in. that hasn't happened. with gasoline at $5 in some places, and i'm channeling you, $5, kevin, and $4 i paid for it this morning. >> we're over $4 here. >> that makes you think that rates are going to stay low because that's such a negative for consumer spending. did you see that walmart aid? >> walmart came out with that auto friday.

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walmart denied that it was taken out of context. but that has to concern people when they start thinking about that. >> these are quick offsets. when you talk about income or you're building your gdp, right, one of the numbers that people are calling for, the income levels being offset quickly, conversely, the bright spot, using their quotes last week, was that inventory in the factory level was going up. so do you get a better gdp report, it's going to be inventory wise, not real spendingwise. so those are the setbacks i think you have to watch those. you know, going forward. but right now, the machinery is -- the financial system machinery is firing on all cylinders and that's supporting these asset markets. >> all right. kevin, thank you. great talking to you. >> okay. >> have you eaten at public foods ever over in london. >> fish and chips.

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shepherd pie? >> oh, that isn't what it is. >> no. >> you love german -- >> i love my german. i don't love german -- twitter is pretty good here. got a lot of stuff coming in sfp. >> what did they say? >> coming up, we're going to head over to the chairs. joe may have some -- >> camel meet? meat? >> no. >> more about food. and just how much money are studios spending to promote their oscars. ken langone, no topic off the table. stay tuned for ken and a lot more. i know what you're thinking...

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♪ welcome back, everybody. it's a special birthday today. happy birthday. tried to get away without telling us. >> oh. >> i was hoping you weren't going to say anything. >> who told you? >> i just found out. >> oh, man. >> trying to sneak away without letting us know about that. >> just go under the radar. >> i had my bar mitzvah last year. 14. come on. >> happy birthday. >> thank you. >> 36? >> yes. >> thank you very much. >> this is an ego trip. >> what's an ego trip? >> "new york times" business day, like front page of the business section, andrew ross sorkin, deal book, your thing. becky's going to start. but then i am giving my time to

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you. >> you are? for my birthday? >> i was going to do it even before the birthday. >> it's his birthday today. >> it is. not only is it andrew's birthday it is the last day for voting for the oscars and there is a little bit of a frenzy that's taking place this year. there is the big spending as the studios are really trying to sway this year's votes for the oscars. in fact there are a couple of films that are expected to be getting $10 million or more in spending to try and promote them ahead of time. argo and lincoln. those two films are really getting a lot of the last-minute push. argo was the big surprise at the golden globes, kind of swept everything. >> you didn't like argo. >> i liked argo. >> who are you voting for? >> i thought "lincoln" was good. >> i haven't seen "lincoln." >> tommy lee jones. daniel day-lewis. >> i do want to see it. >> he's got his voice, lincoln supposedly had kind of a -- >> we don't know. how are we ever going to know? >> it was described.

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>> at the speeches. i think -- >> there was tape, right? >> no. >> but he did apparently have a kind of -- >> snowe one had their iphone with them to record the gettysburg address. they weren't allowed in. they were checked at the door. >> you talk about your -- >> yeah. >> so no, so i wrote this column today about someone who's come on "squawk" before, steve ratter in, and -- and one of the things about steve that occurred to me, i didn't realize this, you know, he had all those problems, two, three years ago, with andrew cuomo and he's come back in many ways. not only coming on tv he's come on our show, he's come on "morning joe," "new york times," "financial times," but the obama administration, which effectively kicked him out of that job, if you remember, and said, you know, has really reembraced him. they had him out campaigning in the fall. he was at biden's big party in december, he was at hillary clinton's house, you saw just

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last month. no, i wasn't there. i thought it was a story about power and the return to power, and in a city where people drop people at a whiff of trouble -- >> the mayor never dropped him. >> i think many of his friends never dropped him. i thought it was an interesting sort of look at both steve and new york. >> what he was accused of, what we're talking about here, i'm shocked. that louis renault at its best, isn't it? like that was never done before? >> it was done, by the way, not just done for his case, but carlisle and about nine other -- >> don't show langone. so, this

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board gives me rates for progressive direct and other car insurance companies? yes. but you're progressive, and they're them. yes. but they're here. yes. are you...? there? yes. no. are you them? i'm me. but those rates are for... them. so them are here. yes! you want to run through it again? no, i'm good. you got it? yes. rates for us and them -- now that's progressive.

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call or click today. we all work remotely so this is a big deal, our first full team gathering! i wanted to call on a few people. ashley, ashley marshall... here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location.

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rally on wall street. the s&p 500 on its longest

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winning streak in over two years. why today's guest host says there's no other place to put money other than stocks right now. ken langone joins us for the rest of the show. >> the chief investment officer of one of the most successful hedge funds over the past years shares his secrets to making money in this market and why he's banking on financials. >> time for an office party. ♪ office max and office depot could keep the merger ball rolling. the latest on a possible deal and what it means for the m&a space. the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" on cnbc, i'm becky quick along with joe kernen and andrew ross sorkin. whose birthday is today. futures are indicated a little higher, up by about 14 points for the dow. s&p futures up by over 1.5.

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nasdaq up by one. let's get to your morning headlines on this tuesday. apple and investor diefd einhorn squaring off in court today. einhorn wants a judge to block apple's proposal that would require shareholder approval for the issuance of preferred shares. that begins at 2:30 eastern time. the cruise ship fire that disabled the triumph was caused by a leak in the fuel line. that's according to the coast guard. 4200 passengers were without power or working toilets for five days before tugboats got the ship to alabama. and microsoft is launching outlook.com, an attempt to try to challenge google's gmail service. it is spending at least $30 million for the launch and plans to migrate current users of hotmail and msn services by this summer. office max and office depot are near a merger that could be announced this week. cnbc's kayla tausche joins us now with more.

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how did this happen? how did you get wind of this? you're out in front of this deal. >> i didn't get the first tip. "the wall street journal" did a great job, had the story yesterday. office max actually set to announce earnings on thursday and i was told yesterday that the deal was originally set to be announced on thursday because of the recent media attention it could be expedited this week, but it is an all-stock deal. if you look at the two stocks, you see office depot is up, office max is down. that's because the expectations that office max will be issuing the shares, office depot shareholders will be getting them. i'm also told that as part of this deal, office depot is expected to sell its 50% stake in office depot of mexico. that stake is worth about roughly $700 million. and that was actually a suggestion that was put forth by star board an activist investor that bought a 15% stake in office depot back in september. the company hired morgan stanley, later brought on peter j. solomon to sell the company. i'm told that these talks were happening since late last fall. office max is being advised by jpmorgan and so this has been several months in the making.

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i think a lot of journalists got wind of this. they don't really believe it because it's been rumored for so many years because of the trouble that's been hammering this sector recently, if you look at the stocks you can see what they've been -- what i've been under. you know, it's a problematic sector so no one really -- you sort of believe it when you see it. >> they're both named office. might as well put them together. >> that's the question they got on twitter this morning. what's the name going to be of the merged entity? >> i don't know. >> what's the stronger brand there? i confuse the two, frankly. >> if you look at -- >> office depot? >> you think so? >> more like home depot? is that why? >> it's certainly the older brand. i think that officemax as far as balance sheet perspective is definitely more successful, so, you know, there are the effective acquire then maybe that's the name they'll stay. it will be interesting to watch this from an antitrust perspective because the last deal that got granted in this space in 1997 got blocked by the ftc. it was staples and office depot at that time. it was a $4 billion deal.

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this is going to be a $2 billion deal. but about half the size. about double the revenues. >> if you're the regulators do you feel so stupid you didn't allow that deal to happen? >> staples is up 115% since then. both office depot and officemax down more 60%. but they actually did have real evidence at the time, they were looking at the prices >> but it's a crazy formula that's antiquated. >> hhi. >> the whole logic of the antitrust is that the public not be disadvantaged. okay? >> they do it for other companies. >> the problem with this industry is it has no pricing power. it's a commodity business. this is stupid. >> what they found the last time was that office depot was effectively manipulating the price of file folders. that a file folder was $1.95 in areas where there were several of these retail ert. it was $4.17 for a file folder in areas where they were the only office supply retailer, so they said that that was real evidence. but at this point, you know, of

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course these are products that small businesses, consumers, students, that was the issue with the beer deal. they said this is something that everybody buys not just the wealthy. not just the 1%. so that's why they're going to regulate here. but you have to look at the performance of the companies and think, why wouldn't this happen? >> i blame it on too many lawyers. especially antitrust lawyers. >> they got nothing better to do than scour the file folders? >> ken, did you ever think about home depot buying office depot? >> no, but let me tell you what -- >> i would have thought -- >> when we coined -- >> the depot? >> the name home depot which was given to us, by the way, by one of our original investors, falkland, she did very well by the way, she didn't get anything for the name, but she did very well, we thought early on about office depot, however, if you trademark a name and don't use it, you lose it. we were -- now here's the thing about this industry, if there's any industry that's going to be impacted more by showcasing than

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this, this is not unlike best buy. you go to a office depot store and you price this and you price that -- >> then you go -- >> you go online. they even make it easy for you. they help you learn all the features of the different things so you can go back. this is what you want. this is what you don't want. but all you're seeing here in this merger in my opinion is the hope that through synergies they can lower their cost and stay around longer. >> stay around longer. but still get put out of business. >> look, i don't mean to knock any industry or any business. this is a tough business. any time you have a captured edge where you can't differentiate yourself, you're in trouble. commodity business. >> and staples, i believe, thinks that its competitors now are amazon and costco. it doesn't believe that its competitors are office depot and office max because it has been able to leverage that online capability. i know i buy my office products on staples online.

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i haven't been into one of these stores in years. >> 60% of office depot's online? >> that's a number that i'll check. >> some staggering percentage. that's where you are. and that's where all these people that don't have sto storefronts have an edge on you. they haven't got labor costs. >> where was dealbook on this whole thing? >> i believe there was a story. >> oh, okay. >> writing it. >> after the "journal." after the "journal"? >> well, i believe the "journal" -- >> i don't have the tick by tick on who broke what. but i do hope that we have some good office space books unfolding in this deal. >> kayla tausche, thank you very much. keep us updated on what's going on in the office world. this could be a whole beast. >> don't suggest that. >> you don't like her? >> no, i do like her. >> anyway, several key pieces of economic data and earnings from walmart ahead this week for investors to consider. joining us now, barry knapp, head of u.s. equity portfolio strategy at barclays and, of course, he needs no introduction. i don't think we've given him

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introduction so far this morning. ken langone, co-founder of home depot and a former nyse board member. >> nice to be with all of you. >> i'm going to go to barry real quick on this. barry, when you think about both -- some of the indicators we're going to see this week and you think about all the mergers, frankly, we saw last week, and what kayla was just talking about, we've talk a lot about this idea, and i think you've talked about how you've been worried that the market might be ahead of itself. i'm now worried that the market may be behind itself simply because there's this whole newfound sense of confidence that may be keeping this thing going longer than we think. >> well, as far as the sentiment and competence dynamic that the mergers, we did think that business confidence would improve during the course of the year. it was so depressed last year because of public policy,

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uncertainty and questions about tax policy and the like. the election-related issues. that we clearly think is the part of the market that will get better. that's the part that we like. so capital spending. sensitive stocks. the technology sector. industrials, and the like. we think will do pretty well. the parts of the market that we're really concerned about and the reason that we're cautious here tactically is all to do with the consumer. and it's this idea that people have completely underestimated the impact of the $200 billion tax hike. walmart's leaked internal memo is a case in point around that. and that we may very well have additional fiscal contraction coming through the course of the year. we're a little bit less worried about the sequestration relative to the tax hikes. but still, we think that we're going to be in for another very soft growth patch and that the market won't just look past it just like it didn't look past it each of the last three years. >> ken, what do you make of what's going on right now? doesn't it feel like people are in a much better place than they

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were before? am i wrong on this? >> well, because of the market. >> the market, yes. >> but you've got to look behind the numbers to ask what's happening. if you want yield, you're not going to find it in fixed income. you're going the equity market. i had breakfast yesterday with stan druggenmiller and leon cooper, and it was interesting to listen to these two giants who are not only successful business people and investors talking about, you foe, what's going on. the fundamentals haven't changed. haven't changed at all. and we don't know when the storm is going to hit. but it's going -- >> you think a storm is going to hit? >> has to happen. when you look at our debt to gdp, eventually you reach a point where there's no turning back. >> anyone have a copy. baron's. did you see the cover of barron's this week? >> i did not. >> take a look at this. here it is.

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put up -- can you get that on here? follow me, we can be like greece. that is the cover. says, if we follow president obama's plan, the u.s. in 25 years will be in worse shape than greece is today. >> by the way, stan druckenmiller, he is going to become more publicly vocal. >> is he? >> yes, he is. because he feels strongly that this is just a rape of unborn children. it's -- it's generational theft on an enormous magnitude. i frequently, if i have to give a talk, i ask people, particularly if they're older like i am, i say to them if you had one meal left, and you had your grandchild with you, would you eat it or would you give it to your grandchild? they all say, i'll give it to my grandchild. guess what? they're eating their grandchildren's breakfast, lunch and dinner right now, and they haven't been born yet. this is going to happen. >> right. >> these are --

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>> i think these are absolutely great points. i mean, our prior perspective on this has been the periods in when you get big bull markets on stocks, when p/e multiples go to 20, the '50s '80s and nineties, those occurred with stable monetary policy, government spending generally falling as a percent of gdp. not in these environments where we have interventionists policy, you know, at every turn. and so from our perspective we're just going to have these three months of optimism and three months of negativity, until we can actually stabilize all that. between now and then, you know, i just don't see how you get in to this big bull market dynamic. now, ken brought up a great point which is the parts of the stock market that really continue to work are the parts that work most like the bond market. the health care sector is the best performer this year. stable cash flows. high dividend yields. stocks with bond-like

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characteristics. so there is that dynamic where the money is getting pushed into the equity market where it looks like the bond market. but just buying stocks and thinking that we're going to a 20 p/e with this much instability around policy, to me, is just -- would be unprecedented. hasn't happened in 70 years. i just don't see it happening now. >> okay. barry, thank you for that. we will talk to you again, i'm sure, very soon. ken is going to stay with us for the rest of the show and we're going to have a lot more to discuss with mr. langone. >> still to come this morning, the chief investment officer of one of the best performing hedge funds over the past five years and why he's betting on a housing rebound. also where he's making money in the current market. take a look at futures this morning. the american dream is of a better future,

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so, when you found a company, and co-founder, and you make like a lot of money, you become a big philanthropist and

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it's the langone medical center and does amazing stuff. but you also are able to invest in a lot of other things. so he's always got really interesting things that he's talking about. right now he's like fumbling with the mike. you ready? >> i'm ready. >> keep it clean. we're on tv now. keep it clean. but you got some really f'ing cool stuff that you brought in here, didn't you? >> i'll tell you why i brought it in. i do believe there are significant economic activities out there in spite of what's going on. >> right. >> particularly amongst smaller companies. this is where i typically spent most of my time. but i got here, i brought one for becky. here's a jacket. >> north face. >> north face. and it's got 51 recycled water bottles in it. >> is that true? really? >> yeah. >> i don't want to go to jail because i'm advertising it as such. this has 45. the men's size has 51. >> andrew, you're going to love that. >> i do. >> and it's north face? >> so you've invested in a company called reprieve? >> no, no, no. reprieve is a brand uned by a

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company called unifi. >> tell me what this is? >> this is a beanie. that would look good on you. put the damn thing on you. >> i put it on and then i take it off- >> your wig will come off. >> the one you say is dyed. >> put it on. >> i'm not putting it on. you know how long this takes? >> put it on. >> he put on a facebook -- >> somewhere in his past is a schmop guy. >> my grandfather. >> there you go. >> how about that? >> we gave away 10,000 of those -- it's good for warmth. >> by the way, there's six water bottles in that. what i'm saying -- >> that -- >> water bottles -- >> in the yarn. it's not just the stuff. that's what i thought at first. >> normal people can't invest in this, can they? >> i have a healthy disrespect for all this corporate governance nonsense that's gone on for the last ten years. and i said that i'm the longest

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serving board member, been on the board 43 years. i was one of the founders of the original company who put it into the textile business when that business died. but anyway, i said why don't we have the age limit for directors be the earlier of death or 100 years. >> yeah. >> wouldn't that be great? >> yeah. >> you know, this is unifi. it's public? >> it's a public company. >> what's the symbol? >> ufi. on the new york stock exchange. >> okay. >> you had a market cap one time of over $2 billion. here's an example of where business has come back -- >> you got involved and it's now $250 million? >> that's what happens to all my situations. ask perot, ask bernie, i do a great job bringing them down. i keep them humble. >> you like -- why are you talking about parker anderson? you like that stuff? >> i think this company is truly one of the great american companies. reasonable value. the guy that runs it is first class. i mean, real solid american.

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midwest. great company, great products. great technology. very inventive. for example they've got one product where, you know, like buses and garbage trucks and new york stop, start, stop, start. they're able to recapture the energy of the braking, and i think the energy saving per vehicle is staggering. i mean this is the kind of stuff, and it's a very successful. they raised the dividend three times last year. they were only one of five companies in america that have raised their dividend every year for the last four or five years. >> what's your connection with parker hanoven. >> i own stock. i got to know the chairman, in fact i tried to see if he was available for an interview. >> you've got to bring these guys on. >> i only was asked on friday. wonderful company. wonderful people. i spent a day out there last summer. solid, rock -- if america's going to make a come back it's going to be for companies like this. >> can you buy maaco, is that public? >> public. >> robotic. >> surgical procedures for

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knees. i mean, there's -- >> knees and hips. >> knees and hips. >> you own that, too? >> yes. you look at parker hanoften, you look at caterpillar, it's on the backs of these companies that we're going to come back. why? because quality products, solid management, maniacal about costs, they're going to be very competitive. and first class products. this thing right here is a good example. this really is, when you think about the co2 emissions that you reduce with this. by the way, give you an interesting number about america. in america we only recycle 29% of our water bottles. in western europe, they recycle the 48%. and in china, they recycle the 83%. >> really? >> we got a long way to go. but what i'm saying is, here is -- by the way, what our product has got in it which is also exciting, we can guarantee that it is recycled material.

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we have a tracer in our yarn, we're the only one that has it. so if somebody claims they're selling you a recycled product, and it says reprieve on it, for example this says applications, paint rollers at home depot have it. the ford, the two models, the focus, the focal -- >> ford focus? >> focus. and next year i believe the f-150, the nfl all of the paraphernalia you bought for your kids this year. >> yes. >> all was made by reprieve. >> all right, ken. you got other ones, too. yum, want to talk about some of these other ones. >> we'll talk about it. let me say this to you. >> no, we got to go. >> all right. see you later. >> got commercials. >> he's with us for the rest of the show. we will get to it. we're also going to talk about pain at the pump. consumers could be facing higher gas prices over the next several months. we're going to tell you why. and then he made big profits by being long subprime in 2012. find out what this money manager has in store for 2013. brian taylor is the cio of pine

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river. will join us at the bottom of the hour. stick around. the patient, presented with a hairline fracture to the mandible and contusions to the metacarpus. what do you see? um, i see a duck. be more specific. i see the aflac duck. i see the aflac duck out of work and not making any money. i see him moving in with his parents and selling bootleg dvds out of the back of a van. dude, that's your life. remember, aflac will give him cash to help cover his rent, car payments and keep everything as normal as possible. i see lunch. [ monitor beeping ] let's move on. [ male announcer ] find out what a hospital stay could really cost you at aflac.com. more "likes." more tweets. so, beginning today, my son brock and his whole team

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welcome back to "squawk." consumers are experiencing more pain at the pump than ever before. the average cost of gasoline, of a gallon of gasoline, has jumped 51 cents in the last few months. in mid-december the average cost of a gallon of unleaded was $3.21. currently that price now $3.73. and while there has been a steady increase in the past 30 days, the price jumped nine cents over presidents' day

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weekend. if that trend continues, experts say that gas prices could top the all-time record of $4.11 which was set back in 2008. >> you read your paper yesterday? >> i did. >> oh, we got to go. the piece on keystone. he's under enormous pressure. >> when we come back one of the most successful hedge fund managers in 2012. he was up 35 prps modern world... would define you as an innovator. to hold more than one patent of this caliber... would define you as a true leader. ♪ to hold over 80,000... well that would make you... the creators of the 2013 mercedes-benz e-class... quite possibly the most advanced luxury sedan ever. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. [ babies crying ] surprise -- your house was built on an ancient burial ground. [ ghosts moaning ]

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welcome back to "squawk box" this morning. in the headlines we're going to be watching shares of herbalife once again today. a source is now telling cnbc's scott walker that hedge fund manager dan loeb has sold part of his long position but loeb's third point still holds a position in the nutrition company. bill ackman has a short position in the company calling it a pyramid scheme. we're also going to get a fresh reading on the housing market this morning. the national association of home builders is out with its monthly sentiment index. economists are expecting the index to rise to 48 from february from january's 47 reading. the company that owns reader's digest, it's filing for bankruptcy protection for the second time in less than four years. rda holding has filed a prenegotiated bankruptcy that's

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going to allow it to cut its $543 million in debt by about 80%. becky, back to you. >> andrew, thank you. 2012 was a lackluster year for the broader hedge fund industry but not for our next alpha master who was up over 35% net according to investors. joining us right now is brian taylor, founding member, ceo and chief investment officer of 12.3 billion hedge fund pine river capital management. he is also on the advisory board for this year's cnbc institutional investor, delivering alpha conference, and brian thank you for joining us on set this morning. >> thank you, becky. >> you know, a performance above 35% is incredibly -- incredibly -- it's amazing to hear a performance like that. i know your big bet in 2012 was to go long on subprime. where do you stand right now on th housing market? >> thank you. you know, the housi market has been obviously soue of the isis b i 2008 and these

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cle.e lg to dt'enou know, we're very constructive on housing. it's been a key theme that's driven opportunity across our hedge fund business. last year in particular, it drove opportunity in mortgage credits, subprime mortgage bonds. but, it -- it also then felters through and has positive impacts on banks, we have exposure to the severity of losses in subprime and other mortgage credit. as well as companies like servicers, who process the loans. and additionally, we run a couple of icly traded companies to investment corp in silver bay. silver bay purchases single family homes. rehabs the homes, and then rents them to generate rental income.

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and the -- so the same opportunity housing market recovery is driven investment opportunities across the business. >> we had someone on the program last week who talked about how this recovering in housing he thinks is being over played by the media. he is looking at this from the perspective of somebody who is investing money in rental income properties still. and he thinks that it's going to be a very long time before the rental income properties get hit by a surge, or a resurgence in housing. how do you kind of match up what he's doing and what you're doing because you've both done very well. >> it's broad-based. markets seeing tremendous gains in house prices. we're out there buying every day across a number of markets. and you know, it's for real. i mean the inventory is inventory is down. you know, demographics are improving. absorption is going to take -- taking up the slack. and you know, there's been quite

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a bit of institutional capital that's come in to the single family home market. and it is recovering. and so i think, you know, a lot of people are looking for single digit gains this year in housing, and we're more optimistic than that. >> so you think it's going to be a broad-based recovery that continues to push ahead? >> yep. and that's -- we'll have a big, broader effect on the economy as positive for the consumer, for banks, part of the healing process from the crisis. so, that's constructive, and banks are much healthier. than they have been. you've seen an increase in lending. it's fueling a lot of m&a activity that we're seeing in the past couple weeks. we think that trend is for real. i read your article last week and i agree that a lot of the deals have not necessarily be been -- there isn't a common theme, but rates are low. banks are healthy. they're lending. companies have cash. and so therefore we're

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reasonably constructive. >> what's the length of the mortgages, conventional mortgages banks are willing to give out now for new homes, new purchase? >> well, you know, unfortunately the economy, the government is still guaranteeing about 90% or over 90% of -- >> that's principal. >> yep. >> there's the interest rate. >> yep. >> in other words -- >> yeah, no. 30 year conventional fixed is available. >> 30 years? >> oh, sure. >> 4.5, something like that? >> yeah. or less. you know. 35 base -- >> what do you mean? >> interest rates go up. >> right. >> and it's going to happen. >> the bank is caught holding -- >> i mean -- >> after world war ii companies like gulf oil sold 2.5% 30-year bonds. >> yeah, you saw the fed, the discussion about the fed's exit strategy and how it's going to cost some money when we emerge from this cycle. that's okay.

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that's what it takes to recover the financial economy. >> but that's the federal. >> yeah. >> how about the people that are buying the mortgages? >> well, so -- >> so the mortgages get recycled and packaged -- >> i'm with you. i think housing is coming out of this pretty good. thank god, because it's good for home depot. >> besides home depot which clearly is affected by the housing market, are you in the space that he's in? >> i tell you, i'm a big fan -- he does a hell of a job. he's got the right price points. i own some of that stock. he's a great -- by the way, the good operators you know, they're more segmented by price. you've got different guys playing in different sectors by price. i agree with you. i think you're going to have a pretty good housing market for awhile. all i worry about is who the hell is buying this? for example i've got an investment in apartments here in new jersey and we just refinanced, at 30-year

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amortization rate, seven-year mature by by 3.15%. you know, take it in all day long at that rate. but if rates go the other way in the next three or four years, the guys that are holding that paper are going to either have to carry to maturity and do without the yield they would have gotten had they had more liquidity to take advantage. >> i understand. but that's a sign of health in the economy. and most of the government guaranteed mortgages are packaged and distributed as mortgage backed securities. most of the holders of mortgage backed securities do hedge rate risk. rising rates will be a sign of health in the economy. >> i agree. >> but you could see some investors who really take a beating on that? >> oh, sure. we've had a huge bond market rally and it would be good to be hedged at this point. you know, we don't see really too many signs of inflation yet but eventually.

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[ inaudible ] i mean, you know -- >> well, the fed. >> somebody's getting paid to take -- >> well, the fed through qe-3 has lowered rates than they would have been otherwise. >> oh, okay. okay. >> but that said it's been worth it. it's had a good effect on the economy. >> okay. and brian, if you had to look at the next trade beyond that, is there something else that you're kind of seeing sizing up right now, as something that's developing this year? >> sure. you know, well we have a diverse operations, we trade relative to value, fixed income across the globe. opportunities in asia, if i had to make one pick it would probably be aig. we think management's done a terrific job of restructuring the company. they've delivered a good return on shareholder -- or taxpayers investment. you know, through t.a.r.p. trades hit a 35% discount to book value and we think that they've invested in technology, and we think it's a great story. >> okay. brian, thank you very much for joining us this morning. >> thank you.

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>> hope to see you again. >> thank you. >> up next, "the wall street journal" ranking jen brands as the number one venture capital backed company in a list of more than 5900, in fact. the company ceo will join us to announce a new alliance with a major partner. and don't forget, "squawk box" is online and on mobile, too. if you have like a smartphone. one of these iphone things. follow us on twitter. @squawkcnbc. you can like us on facebook. you really like us. and visit our show page, squawk.cnbc.com. revolutionizing an industry can be a tough act to follow,

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secretive chinese military unit is believed to be behind a series of hacking attacks, according to a report by u.s. computer security company. the company believes the chinese unit carried out sustained

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attacks on a wide range of industries, and the comments are prompting a strong denial by china, and accusations that it, in fact, was the victim of u.s. hacking. nonny, nonny, nonny. i don't know what that is in chinese. but it's -- you think -- you immediately threw the u.s. under the bus and said you're sure we're spying on them. >> but hopefully we're not -- we're probably spying. hacking and spying i think are two different things. >> but that's -- that's where you're in new york and new york -- that's where you think we probably were doing bad things, too. you can't just be mad at the chinese. we were complicit or we were doing it too. that immediately what you think of with this? trying to balance -- >> balance. >> livan up the conversation. let's talk -- we have a disrupter this morning, continuing our ongoing disrupter series now with "the wall street journal's" number one ranking of the next big thing top 50 start-up list and the company is

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also announcing a special alliance. i won't say with who on our air today. joining us now onset is charlie, president and chief executive officer. thanks for joining us. >> thanks for the opportunity. >> since i imagine, and maybe i shouldn't imagine it that some in our audience doesn't know what genband does. >> genband is a technology start-up as wall street dubbed us. we basically make soft switches, we make gateways, we make application servers. so we've been helping the traditional service providers, the at&t, verizon, sprints, telecoms of the world, transform their legacy network to a next generation. >> so you're competing against whom? >> we compete with companies like alcatel-lucent, cisco, nokia siemens. ironically they're also business partners, as well. we live in an environment where,

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you know, those who you compete with you still partner with. and so we find ourselves in a situation where we're both partnering -- >> so when tom friedman writes this weekend that he would love an infrastructure project that includes, you know, broadband wi-fi around everywhere, that would benefit you. >> absolutely. >> and you're pushing for that? >> absolutely. >> tell us about this announcement this morning. >> well, -- >> i should say it's on the screen already so the surprise is out. it's with samsung. >> yeah, so we're really excited. traditionally genband has been helping fixed wire line carriers. clearly the network is moving faster and faster to mobile. and we're really excited about this new partner 147 alliance that we're announcing today with samsung where, you know, both companies have a shared vision to really disrupt today's business -- >> samsung is a mobile handset provider. they traditionally haven't been in this space. they're usually running on top or with the carrier.

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>> which is really where the value proposition of both companies come in. today genband services 600 carrier customers around the world. most of them are supporting consumers, as well as businesses. samsung has traditionally been selling into the consumer market, and so when you take genband's technology and our market leadership position in the carriers, and you take, you know, samsung's market leadership position in the mobile space, and you combine those, you know, it gives us a very -- >> combine them as what? this is like gobbledygook. >> you take our unified communications technology, so today, you know, if you're -- you know, you think about what the typical business environment looks like, we're all operating with multiple devices. you've got a fixed wire line phone, mobile phone, two mobile phones, you've got tablet. you've got a pc. you've got all these different devices, and the whole strategy and vision with the relationship is to really migrate to a single device. and wouldn't it be nice to go in to your office and have a

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docking station with one device that was allowing you to do all of your communication. >> almost like a tablet that you take everywhere with you? >> it is a tablet. in fact i'll give you a little prop. but basically we're taking samsung's tablet. we're integrating genband software to where we're creating a true unified communications experience for the business user. imagine coming in the office with a docking station. >> drop it in there. >> drop it in. i'm doing all my voice, video collaboration, e-mail, file sharing, and when i leave the office, i take the office with me. wherever i go. >> why can't i do that already? i have an ipad, for better or worse, and i feel -- >> you can do some limited things today. >> okay. >> but the biggest challenge that, you know, i.t. managers, cios have today, is the fact that we're tethered by, you know, fixed wire line device. and the i.t. -- >> fixed wire line device meaning this telephone? >> that's right. >> okay. >> so, you know, business users,

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you know, employees, they want to be able to, you know, use whatever device they want to use. they want to be able to, you know, take that phone wherever they go, and they want to take all the applications that they're using -- >> does it matter if it's all done on samsung, meaning joe? joe now has an iphone. his iphone -- >> no, so genband's technology will work on, you know, any -- any mobile device. so -- >> it will work on a blackberry? >> it will work on a blackberry. >> well, not really. >> i did hear that becky -- >> i mean it's like a stone age, really? i mean you got -- it doesn't work as well. >> software package? >> our, you know, what we're providing is, is software that is integrated onto a tablet. >> okay. >> that is basically unifying all these different apps. you have all these tools today that you're using at the office. and you know, everybody wants to take those applications with them wherever they go.

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>> right. >> and that's the notion of taking pretty sophisticated software tools that you're using today at the office, a lot of the new cool stuff, you know, like web collaboration and instant messaging, all those sorts of things and integrating them into a tightly integrated package. >> okay. we've got to leave it there. thank you. >> thank you. >> congratulations on the announcement. i appreciate you being here and being the number one -- when did that happen? >> it was announced in september of last year. >> thank you. >> thank you. >> when we come back, we have much more from our guest host ken langone. plus take a look at the futures this morning. first trading day of the week. dow futures up by about 10 points. s&p up by just over two. oil prices have been lower this morning. right now in fact they're down by about 23 cents to $95.63. probably not much good news in that if you're looking at the pump this morning, though, because those prices have been higher.

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how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you. we all work remotely so this is a big deal, our first full team gathering! i wanted to call on a few people. ashley, ashley marshall...

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here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location.

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don't miss the dierks bentley. coming back. let's take a look at some stocks to watch this morning. medtronic earned 93 cents a share. two cents above estimates. and the company says it's dealing with the changing health care environment, but it remains committed to delivering dependable growth. conagra is raising its 2013

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earnings forecast to 2.15. the wall street consensus estimate is 2.13. it sites contributions from ral corps, the old ral stan purina. and, herbalife. i figure if it has an "h" -- why not say it? can i say herbalife. herb greenberg -- in this case it's scott wapner that reports hedge fund manager daniel loeb has sold part of his long position in the nutrition company. i don't know what to think. icahn got it up a little bit but it seems heavy, doesn't it? doesn't it look kind of top heavy? the minute it gets a chance seems like people -- >> want to get out? >> i don't know. sources tell wapner that loeb began selling a few weeks ago although he maintains a position in herbalife.

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icahn may have been able to buy it lower than it is now. >> 36. >> i think he bought it a little lower. but ackman is making money now, too isn't he? >> where did ackman buy it? >> sold it. sold it at. >> what did he start the? >> 40s. maybe 42, 43. >> so everyone's a little bit in the mud. it's funny, if you're an investor, in dan loeb's fund and you're an investor in ackman's fund -- >> you go both ways. >> i think by default you probably lose money. >> depending on what the banks. loeb realizes gains. >> i used to think >> if you had $100 in each fund, and they started at the same price. >> but they didn't. >> but they didn't. >> they didn't start at the same price. that's why -- >> because i know a couple of investors who have investments with both investment managers. >> dynamic. >> all right. when we come back, we're going to be talking more about putting the tesla's "s" to the test. cn cnbc's phil lebeau doing a test drive after a little bit of

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controversy last week on how far the car would go when fully charged. he left earlier this morning. and we're going to get an update in the next hour. plus cnbc contributor richard bernstein was on the lookout for this recent wave of mergers and acquisitions. we're going to friend out if he thinks the deals could keep flowing and what it means for the overall market. ♪ [ male announcer ] how could switchgrass in argentina, change engineering in dubai, aluminum production in south africa, and the aerospace industry in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. ♪

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our guest host is never shy about speaking his mind. >> the fundamentals haven't changed. haven't changed at all. >> one more hour with in the med associates and home depot co-founder ken langone. >> and we'll kick off the short trading week. richard bernstein will join us to talk about the strength behind the bull rally and the appetite for m&a. >> phil lebeau taking the tesla model "s" for an extended test drive. >> it's a test drive, right? i never drive around here. i'm going to recommend this car i need to see if it will handle may daily routine. >> we'll catch up with him on the first charging station on the route from washington, d.c. to boston. >> oh, man! not the gas. >> but it needs it, cramer. it needs it bad! >> the third hour of "squawk box" begins right now.

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>> welcome back to "squawk box" here on cnbc. first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. our guest host this morning, ken langone, chairman and president of invemed associates. co-founder of home depot. first andrew has some of your morning headlines. another depot. >> let's tell you what's going on. office depot in advanced talks to merge with smaller rival officemax. it is expected to be a stock for stock transaction. kayla tausche has been reporting on this story. she will keep us updated throughout the morning. also this morning, a secretive chinese military unit is believed to be behind a series of hacking attacks. this comes according to a report by u.s. computer security -- by a u.s. -- excuse me, security company. the company believes the chinese unit had carried out sustained attacks on a wide range of industries. the comments are prompting a strong denial by china and

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accusations that it was, in fact, the victim of u.s. hacking. lastly an update on the boeing dreamliner that was forced to make an emergency landing in japan last month, cells in the second lithium-ion battery on the plane showing slight swelling according to a japan transport safety board official. the jet flown by all nippon airways was forced to land after the main battery failed. i don't know what that means for this long-running investigation. finally today, alan simpson and erskine bowles will announce a new detailed proposal for rewriting the tax code and implementing new spending cuts. the deficit hawks say their new proposal would reduce the federal budget deficit by $2.4 trillion over ten years. "the wall street journal" is now reporting that the plan will identify $600 billion in spending reductions through changes to health care programs such as medicare and medicaid. another $600 billion in deficit reductions would come from curbing or ending a number of tax breaks. the final $1.2 trillion would come from lower caps on

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discretionary spending, changing the way cost of living increases are cal cue lated for government benefits, cuts to farm subsidies and changings to military and retirement promise. >> simpson and bowles are going to be up on "squawk on the street" at 10:00. this updates the entire situation. i guess we'll have to call this simpson-bowles two. but this is something that business leaders will be watching, and political leaders, as well. >> the original plan was for how much money? >> i don't know. i have to go back and look. >> so this is now $2.0? >> i think obama -- >> -- governor romney to embrace my words. >> he knew it all. >> the response i got indirectly was well, we're already doing it. i said if we're already doing it, take credit for it. >> he said he had his own plan, ken. >> that's history, okay? but the point is, i think these guys are doing a hell of a service to the country. i really mean that. i think we got to address this. if we don't we're all going to

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have serious problems. i don't know when, but it's out there. >> it's great to have a blueprint, and to have a bipartisan blueprint between the two of them. hopefully something washington can get on board and follow along. >> i understand mark hoffman doesn't want us spending more time than we have to on the administration. let me say this about the health care bill. >> i don't know where you heard that. >> you don't hear -- i woke up, and i got it in my sleep. i had it as a dream. i got up at 4:00 this morning before i went to the gym. but anyway, we all raised hell about what's in that health care bill. well the grim reaper's going to show up january 1, 2014. trust me there's no way you're going to impact that whole program unless you get the little people, the middle income people, people like my late parents, and when that happens the american people are going to realize it isn't going to be the health care they thought they had. it's going to be a hell of a lot different than what they had and what for the most part they liked. the eternal optimist that i am,

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between january 1 next year and election day of '14 i think there's a good chance americans are going to say wait a minute, we've been had. this isn't what we thought. >> see this today? >> i haven't read it yet. >> ft, employers are either going to cut back on work, on how long workers work or pay the fines because it's going to be so prohibitively expensive -- >> i don't know. when's home depot going to release their records? >> you're asking us? >> yeah, i want you to know that's how far -- i'm now an outsider. >> next week. >> okay. >> we can't wait. >> home depot announced, i'm guessing that they're going to hire 80,000 part-time people this year up from 70 last year. i'm guessing. but i think part of that is because part-timers will not be allowed to work more than a certain number of hours a week or they flip into full-time category. >> so this is you think more part-time workers at the expense of full-time employees? >> think about the part-timers that every once in awhile, go to the manager, look, can i get four more hours?

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can i get six more hours, i had an unexpected bill. no more. gone. what i'm saying is i think that when the full force of this law, which nancy pelosi said, what did she say, you won't know what's in it until you read it. guess what? when we implement it and it will be implemented the regulations, and the impact on health care to middle income people is going to be dramatic. not going to be -- that's my belief and that's what i said last year and i'll say it again. but, i do think, if anybody believes you're going to impact what america's needs are by getting the fat cats like me, you're not realistic. >> we will hear more about bowles and simpson's plans today. >> thank god for these guys. >> it's important. >> i think these guys, to be here doing what they're doing, away from the presidential appointment which they had the last time, which went away, unfortunately, i think is great. that these two guys are out here doing this because somebody's got to be -- >> i bet you the white house doesn't even respond to their

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news. >> they didn't the last time. they presented it to the white house. they said thank you we'll get back to you and from what i'm told nobody heard from them again. >> hopefully somebody will be listening this time around. >> hopefully the american people are listening. i really hope the american people are listening. >> oh, yes we can. >> look at the markets this morning. if you've been watching the futures, you'll see they're still indicated higher, not by as much as earlier this morning but dow futures are up about eight points fair value. s&p up 2.5. overseas in asia, take a look at how trading fared there. the shanghai composite was down by about 1.6%. the hang seng off by 1% as well. in europe right now, you're watching very similar trading. or actually there's h.j. heinz which is down 7% at the premarket. europe, stronger gains than we've seen here. the france, and the cac in france and the dax in germany both up by better than 1% on the trading there. and we go from berkshire hathaway and heinz to american airlines and usair. you've watched what's been

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happening, the mood taking off over the last week. it was a topic that richard bernstein asked goldman sachs ceo lloyd blankfein about when he joined us last month. >> is it possible with these clean balance sheets and fast growth amongst smaller companies we can see an m&a wave coming in the next couple years? this vaeil of uncertainty get removed? >> not only could we, i'll go further and say we should. the conditions are quite right for it. in fact i'd say it's kind of, i can't really explain why it hasn't come up yet. i'll add to it the low level of interest rates. the fact that very low level of interest rates. the fact that industries are consolidating. a lot of opportunities overseas. and i have to tell you, everybody in his own industry tracks a lot of stuff. we track m&a as a percentage of gdp. it's had a much lower level than we should be at this part of the cycle, this part of the recovery. >> joining us right now is

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richard bernstein. he is the ceo of richard bernstein advisers. our guest hose is ken langone. richard, we've watched this big wave of things that started happening over the last couple of weeks. you think that this is just the beginning? >> i think it is, becky. remember, most people are ultimately trend followers. right? you don't see a lot of m&a very early in the cycle because corporations are scared of the recession that they just saw. and as the cycle begins to mature you'll see m&a pick up and the point i was trying to make with lloyd several weeks ago was that simply we do have low rate, there's lots of cash on the balance sheet, corporations, a lot of big corporations have underinvested for future growth, they're going to have to essentially buy growth. i think that that is the groundwork for a very sizable m&a opportunity, m&a cycle that i don't think is going to be short-lived. i think it lasts for the remainder of the cycle. >> some of these deals that have come over the past couple of weeks seem like they were one-offs that were not related to the broader macro economy.

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some of these deals would have happened one way or another. >> i think that's right. in some places consolidation. i think the real opportunity is still amongst splauler companies. smaller companies, i've said this every time i've been on your show. the projected earnings growth rate for small u.s. companies is higher than projected earnings growth rate for the emerging markets. this is a tremendous growth story that like nobody cares about. and i think that larger companies are eventually going to just move beyond the size scale and start buying growth. i think that's going to be a very, very huge story. >> ken, you agree with that? >> yeah, you know, i guess. but i think 99% of all m&a shouldn't happen. i'm serious. >> probably true. >> it's a good pitch for wall street to go in to some ceo you want to play on the world stage, you want to be a big guy, you got to do this deal. that was late bruce wasserstein's famous line to clinch a deal. look at what happened to tyco and the stocks -- you want to

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make money on stocks. get the stocks after they've spun out. so, you know, i don't see why we're making such a big issue. heinz is not m&a. heinz is a portfolio decision by two investors. the guys down in brazil, and warren buffett. and it's a financial re -- it's an engineering feat more than it is m&a. it's not conagra buying heinz. it's not general foods or general mills. the point is i think we take a step back from m&a we got to understand that if you look that them retrospectively they don't do very good. >> did you ever do any deals at home depot? >> yeah, we bought a lot of businesses. and they're all gone. we bought home depot supplies was all acquisitions. gone. we're back to the good old orange boxes. making lots of money. but clear reasons not the rest of which is frank's superb

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leadership and the best management team home depot has ever had in its entire history is there right now in every single function. so what are we back to? we're back to doing what we should have been doing all along. by the way, shame on me, because i was part of that. >> who were the bankers -- everybody. >> oh, everybody had something for sale. >> got something on the way in, something on the way out? >> of course they do. they're making both ways. look at the fees, look at the fees that the late lehman brothers got when we got rid of hd supply. >> what about interest points about the smaller companies? >> the larger companies with this huge amount of cash on the balance sheet, don't you think they're underinvesting for the future? i mean i don't think you can invest for the future and forward cash can you? >> yeah, you can. >> but if you're apple do you hold onto the cash, give it back to the shareholders or actually make a deal? >> this little company i showed you with these jackets. unifi, first order of business is technology that allows us to be more cost efficient, and more competitive in the world.

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and commodity business the name of the game is cost. if you can't manage your cost in the commodity business you can't compete. second order of business, that's the first order. the second thing we're doing now is buying the stock. because if people want to give us five times ebitda and we've got a good balance sheet now, this company was in serious trouble six years ago. >> rich, it will look good on you. >> what is that? >> that's made out of -- >> five recycled water bottles. >> you can wear it. >> you go out in the sun or something. >> did you put it on? >> you're much better looking than i am. >> yeah, but he has hair. >> go look at all this m&a -- >> you're not going to do it? >> i mean, it's a great hat. >> if you weren't on tv you might try it on. >> if i weren't on tv -- >> if you go skiing and you didn't have a hat. >> ken and i have something in common here. we have -- >> looks like his is by choice. mine is by god saying you had it up here for awhile.

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>> i think this is going to continue. because as i said i just think that there's this uncertainty. everybody's talked about uncertainty. and i think that uncertainty -- >> people have been talking about cash on the balance sheet forever. >> right. >> so why now? >> well, what you have to look for is you have to look for companies where return on assets is starting to go down because they're hoarding cash, not getting such a low return on cash. as that begins to happen, they'll begin more pressure start to begin more pressure for corporate management to do something. rightly or wrongly, what ken's saying, i understand that. that deals are very good for those who are acquired, not necessarily for the acquirer. but i think there's going to be increased pressure on management. >> there are some deals that should be made. eaton bought cooper. great. first of all, sandy knows how to run businesses and he runs them well. now you've got cooper which, by the way, eaton and -- has interrelationships there and it's the same kind of business. >> right. >> this fellow buys these little

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small acquisitions. >> exactly. >> and he swallows them. i'm guessing that if he buys a $15 million revenue company i bet you he at least doubles or triples the margins. >> exactly. >> but that's not m&a as i know it. >> from my point of view, that's okay. >> me, too. >> love small u.s. companies. >> you know what? because, me too. because there's a rationalization, and logic, you can improve what you did. >> exactly. >> you look at some of these big deals that are bolted on. >> that's exactly right. >> wall street wants -- >> because they make money. >> they don't even have analysts that follow a lot of the small companies anymore. >> right? >> yeah. >> richard, thank you very much. >> thank you. >> good talking to you. of course ken is our guest host. he'll be with us for the rest of the show. >> we will have more from ken langone including investment ideas for your portfolio. and our own phil lebeau taking the tesla model "s" for an extended test drive. we're going to catch up with him

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earlier, ken langone was talking about a few companies he likes. let's get some more investment ideas from the home depot co-founder. actually i love this stuff, ken. okay. so slumberjay. >> or though censors? >> what can we do with it? >> hopefully -- >> ortho sensors. >> you have a device that is used by orthopedic surgeons, for example trier to completing the surgery on a knee, they can literally tell whether they've got alignment with this little device that fits into the joint. >> i see. >> and then you can have it in after the surgery and you can monitor it. it's a very exciting technology. and that's a private company. >> what's relationship sciences? >> that's the one andrew -- >> i wrote about it. >> andrew wrote a nice piece on. i think this is really the cat's

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meow. >> it's a good thing i told you about that. it's so amazing. you don't read the columns. >> is it in the northern -- >> could you wreath it for another paper? >> it's a new york based i don't want to call it a social network. all the information is public source. 100% of it comes out -- >> all your relationships with everybody and it can figure out literally if someone you think you know or don't know rather and you want to reach out to them. >> let me give you a for instance. i started -- steel holzmann and i, about two years ago. i wanted to meet the ceo. now parker is not secretive but it's a low-key, wonderful company that just does good things. i wanted to meet the ceo. we put his name in, it turns out that bonnie hill who succeeded me as lead director at home depot was on the border of ak steel. the chairman of ak steel was on the board of parker hampton. i contacted bonnie. bonnie called, within 20 minutes

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i was talking to the ceo of parker hanover. that's a small, simple example. but this is what this thing is capable of. you think about high net worth, brokers. you think about insurance sales. you think about any place somebody would like a introduction to somebody for a business purpose. and it's a subscription model. >> right. $3,000 per person. >> but you get three seeds for $3,000. a year. >> we're going to try to get you -- >> by the way, i've met a lot of the management people. really good people. really, really decent, good people. >> that's a private company, though. >> that's a private company. >> yum brands used to be on the board, right? >> i used to be on the board. and i think david novak is one of the superb managers. >> they're moving into africa. >> yeah. big market. huge market. >> yeah, but okay so you try to do kfc in ghana, turns out that

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they just don't have the farming infrastructure to maintain the quality that kfc needs for the chicken. >> that's a problem. >> they got to import them. meanwhile the ghana currency declined so importing the chickens that measure up costs so much that they got to charge too much for it, so that normal ghanaians can't -- it's just very tough to expand into africa -- >> look at what's going on in russia. they're doing wonders in russia. >> with what, kfc? >> yeah. look at what they've done in china. and by the way this thing with china give me a break. these people, yum, my opinion was a victim. the.is they're going to redouble their efforts on the supply chain and make sure it doesn't happen again. >> it's hard to grow that quick. he's doing unbelievable things in china. >> indiana is where china was ten years ago. and look at the population in ind india. beef is a restricted product for

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spiritual, religious reasons. so you've got great market opportunity there. and india is becoming a rapidly developing country. so -- >> chicken you mean. >> this guy has put to the a superb management team, if you look at taco bell he has a new product. last year they had this taco selling like hotcakes and not cannibalizing the basic taco they have on the menu. so, look, i think yum brands, i've owned it for 15 years, it's the best stock i've owned in those 15 years. >> really? >> oh, yeah, it's gone from 2, 64 so the $250 from 97 till now that ain't bad. >> i would invest in any, you know, mexican foodmaker. previous, i would meet it three meals a day. >> eli lilly, i think -- >> not what i'm -- >> not the refried beans.

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>> they don't like me. you know that. >> i know. >> eli lilly is challenged. i they they're doing a magnificent job of navigating it through the cliff, so to speak. i believe when you spend $5 billion a year an r&d such as they are something's got to come out of it. over the next ten years we haven't got much. >> they're big on neuroscience. they've get some money from this obama push on the human brain. what's wrong? soy-'mot gngri rr nermind. >> i don'tant the government near anyusiness i'm in. all right? please, if it takes doing business with the government to make money -- >> i'm sorry. never mind. >> ken's going to stick around. when we come back, phil lebeau is going to check in from the road. he's test driving a tesla model "s." and a story reminiscent of the qwikster netflix debacle. an iconic brand playing public relations defense. and in the next half hour,

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dell's bid to go plieft. all that on "squawk" as we roll on. more than two years ago, the people of bp made a commitment to the gulf. and every day since, we've worked hard to keep it. today, the beaches and gulf are open for everyone to enjoy. we've shared what we've learned, so we can all produce energy more safely. bp's also committed to america. we support nearly two-hundred-fifty thousand jobs and invest more here than anywhere else. we're working to fuel america for generations to come. our commitment has never been stronger. with fidelity's new options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens and i helped create fidelity's options platform. it's one more innovative reason

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how am i supposed to run a business here without an office?! [ male announcer ] fast, reliable deliveries worldwide. fedex. welcome back to "squawk box," everyone. we've got an about-face to a story we told you about last week. maker's mark is now saying that it will not water down its

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whiskey. >> thank you, thank you. >> the company had announced its intention to reduce the alcohol content of maker's mark in response to supply constraints. but it is now reversing that decision after a backlash from fans of the iconic kentucky brand. and in an e-mail to customers maker's mark chief operating officer rob samuels wrote, you spoke, we listened and we are sincerely sorry that we let you down. he said the company will work to handle product shortages, and instead try and expand capacity at the distillry. i don't even drink the stuff but this is definitely one that did not pass muster. >> no! they don't remember new coke? >> maker's mark want the real thing. >> right. it wasn't going to taste any different, right? go give them credit for the way they came right out and said, we're sorry. that was a classic. when coke screwed up, kehoe said we've got to tell the people, we're sorry, we're wrong, we've got to fix it. and the next year coke's earnings were up 66%. >> people drink bourbon for the

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taste? >> you definitely pay a premium. >> did you ever see the simpson's where they go to the nonalcoholic beer section. >> yes. >> and homer opens it, and it's like a secret passage way. there's no beer there. it's like all this beer -- >> you ever have one of those tsh- >> i would not -- >> what is it owe dowel's? >> it tastes like beer but has no alcohol. let's get to lebeau. >> talking about drinking. >> he's driving right now. >> you can have an o'doul's. phil is driving a model "s" tesla. we saw him depart from washington, d.c. just after 6:00 this morning. he is now arriving at a tesla charging station in delaware. phil, how did it go so far? oh, he's just pulling in. >> that was a very smooth and easy drive. i was going to say flight i'm so used to covering aviation. you know, this drive here took us about two hours. becky, and the interesting thing is, that we were slowed down

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when we were going out of downtown d.c. that took us awhile. slow going around baltimore. a bit of that rush hour traffic. but it was a smooth drive the whole way here. you know, the range on the model "s" is 265 miles. we did about 95 miles, the computer shows that we've got another 155 miles to go. the reason we stopped here in newark, delaware, is because this is part of the new tesla supercharger network. and what we're going to do here is we're going to charge up the model "s" over the next hour. that's going to give us enough power that will take us on our next leg of the test drive, which is from here, in delaware, all the way up to milford, connecticut. we're going to go right by cnbc headquarters there in engelwood cliffs. this is the part of the test drive where john broder at the "new york times," he ran into some problems a week ago, which is the genesis of all of the debate over the model "s," and the range. so we'll see how the model "s" does in this next part of the drive. but guys, the interesting thing,

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when you're driving an electric car on the road, two things stand out. one, instant torque, so instant acceleration when you want it. the other thing is, a lot of people on the east coast in particular, they have not seen the model "s." so you get a lot of people doing this. what is that? what am i driving by here when you're out on the road. we'll give you some sense of how it does in this next part of the test drive. and of course we're going to be doing live reports as we're driving. that's the idea behind the technology that we're going to be trying out today. >> let me ask you a couple of things, phil. first of all the problems that "the new york times" reporter ran into at this point? what were they? >> your specific -- well a couple of things. first of all, he says that when he charged up the model "s," that he was tomd he had sufficient power. in order to make it for the full drive all the way up to milford, connecticut. which is by the way, about 203 miles. the full range is 285. he says as he got close he was running out of power, he didn't have enough battery life to get

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there. elon musk with tesla, the ceo of tesla, said wait a minute, first of all, you didn't charge it all the way as far as you could go. john broder said listen, i went as far as i was told was necessary according to the people at tesla. so it's a bit of he says, she says there. and the other issue is he took a slight detour when he got to manhattan, and tesla is saying listen, you didn't drive straight to your destination. you took a detour which adds some miles on there. so ultimately, what people are looking at, they're saying if i get into the model "s," or any electric car, what is my range going to be? do i definitely have 285 miles, as tesla says? the fact of the matter is, it depends on a number of conditions. it depends on how cold it is. today it's about 38 degrees out here. that's not going to have a huge impact in terms of draining the battery. how much do you use for heating the car, the environment inside of the cabin? how heavy is it? all of those factor in. so, that's an epa rating of 285 miles.

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the next leg, becky, is 203 miles from here after we charge up over the next hour. >> it takes a full hour? >> you have to wait for a full hour. what are you going to do for the next hour? i mean are you at a shopping mall? they set this thing up next to something to do? >> it's a rest stop! it's a rest stop. >> joe i think you can tell i've been to a few of these rest stops in my mind. >> ken makes a point. if you're on a six-hour drive you've got to hang out at a rest stop for an hour, it's a tough sale. >> listen, that is part of the -- guys, that is part of the debate when it comes to electric vehicles. you just can't get into an electric car and drive across the country. well, technically, no you can't. not like you can with a gas-powered car. but there is going to be a network that tesla is building out where you can stop, recharge, whether it be 45 minutes or an hour, and then you can go for the next 250, 280 miles. and then there's going to be another recharging station. >> my parents used to make my brothers take empty bottles with

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them when we traveled because they refused to stop even for bathroom breaks. >> what's the price on the sticker for the car? phil? >> this one right here ken? >> yeah. >> you're looking at now about $72,400. remember, you've got that -- that's after you have the $7,500 federal tax rebate that's then in there,s well. so this is the one with the most battery life. 85 kilowatts. now the 60 kilowatts you're dropping down to 62.4, the smallest, they've not started building yet which will be 40 kilowatts which has the smallest range of about 165 miles. that's going to start at 52,400. so that's the price range you're looking at right now for the model "s." >> you could take a shower right, phil? >> shower? he can get a nap. >> but they do have showers in those places now. or you know, whatever you're into, i guess. basically. >> whatever i'm into? >> rest stops -- >> it's a rest stop.

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>> a lot that goes on at those rest stops lebeau. don't act naive. but you could at least -- the least you could do is take a shower. >> pray to god, phil, that the environmentalists who have $72,000 to buy one of those cars because it's going to be an awfully narrow market. >> it is. >> very narrow. >> it's a nice-looking car, though, phil. >> it is pretty. >> and you look good in it. >> you're going to do well at that rest stop. >> you know, joe, there's a limit to what i can say on live tv. this is not like a scene out of something like mary. >> i'm trying to push you to that limit. that's the whole thing. >> phil, check back in with us. >> i know you are. >> we can't wait to see the rest of this. so we will see you again in just a little bit, and thank you very much. >> which we come back we've got everything you need to know to get ready for the short trading week ahead. we're going to head to the chicago pits for a little bit of buzz that's happening there.

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before dow reports later today we'll preview the company's quarter and the plans to go private.

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welcome back to "squawk box." take a look at some stocks to

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watch in today's trading. express scripts reported $1.05 per share, three cents above estimates. revenue exceeding consensus. express scripts benefited from wider use of generic drugs. also staples, soaring following reports that competitors office max and office depot are considering a merger. also in the news, medtronic earning 93 cents per share. two cents above estimates. earnings were driven by higher sales. although the company is now saying it's still dealing with a changing heat care environment, and we're going to have to keep an eye on that stock this morning. becky. >> all right, andrew, thank you. let's get a check on the markets. rick santelli joins us from the cme chicago. steve liesman is here on set. and rick, we do have some housing numbers that are going to be coming this week. what are the expectations in terms of what this tells us about what's happening with the industry right now? >> well, you know, the bye line is that housing has had its inflection point in 2012 and in many ways it might be hard to

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argue that. we'll get some housing numbers. we're also going to get some inflation numbers. and we'll try to handicap exactly how much of that is true. and we all know it's all to some extent a rate of change game. you know when you get inflation indicators, for example, we are very close to the all-time high level, for example, the cpi index. but, it's the net change we look at, so it's somewhat masks the fact that you're on top of the mountain on that. with housing, it's kind of a similar event. the improvement has to occur, of course, because it was such a tree shaken to the ground in the credit crisis at the epicenter. so there is improvement. but trying to discern, you know, the improvement and a lot of times in new houses, because people can easily, more easily qualify for new house in the appraisers process on existing house. how many are really in bank foreclosures. we're going to muddle through. we do know there's improvement in certain areas. i also have a feeling that improvement gets overplayed as a card many times.

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and interest rates, trying to handicap how is it, exactly, you know, that we're supposed to reconcile interest rates and equities. government economy from the real economy. breaking rules on manipulating your currency versus saying it's okay if it quote/unquote improves your economy. markets are going to have a tough slog ahead. but the easy path seems to be long equities. >> i was surprised that there wasn't more from the g-8 this weekend just in terms of what they might say about some of these measures. >> what could they say? >> because none of them could point a finger. >> do as we say? >> it's that slippery slope, and it's tough for any of them to really go around pointing fingers of blame at this point. but i was still surprised that we didn't hear more. >> the world's gone bernanke. >> steve, i know you've been doing some work looking at gdp as well? >> huge variability. people are just uncertain about what's going to happen in this quarter, in part because of the sequester, in part because of the tax hike that hned the turn of the year.

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and i just want to show you some of the numbers that we came in this morning, we calculated the average for eight or nine different wall street forecasters, and we come up with for the first quarter is 2.1 that doesn't look dramatic except if you look at the variability, which is it goes from 1.5% to 3%. so some guys are at three. you can see 2.1, 2%, 2.4% gradually increasing growth strength as the year goes by. but that 2.1 is all over the place. some of the comments from jpmorgan which originally thought that there was not going to be a sequester this year. but right now what they're saying is it now looks likely that all or large majority of the cuts in federal spending required by the sequester legislation will be realized on schedule. that's one thing. you guys talked earlier this morning about gasoline price hikes. >> what about the walmart story? >> and the walmart story is a big part of what we've been talking about. because -- >> there's some thinking that people did not realize what

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happened to their payroll, to their wages during the month. it was only at the end of the month, when a lot of people get their pay checks, and i want to show you one other thing from die you awow saying individuals would probably adjust spending patterns over the next few months. it's not just a january phenomenon. january retail was a little bit above expectations. we suspect that a dampening influence, i think that's a euphemism for zero, will emerge. mike england who is a friend of ours here at action economics says he thinks it could be deeply negative february and march on the retail sales front. so there's all this stuff going. usually, in the quarter, the variability goes down. economists become more sure as the data comes in, because of the policy uncertainty. barry knapp was talking about that in the 7:00 hour. it's actually widened. there's more uncertainty out there. i find it very interesting, this wall of worry, and this wall of variability that the market is climbing. i suppose it could break in a way that's stable for the market.

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but i think economists increasingly worry it does not. >> all right. steve, rick, guys, thank you. >> that is amazing. dell set to report after the bell tonight. we'll talk to an analyst about dell's results. we should cherish these. there won't be many more. right? and the company obviously with its plans to go private. w do yor car running like new? yneed your oil changedr.en u you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you.

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nice live shot in st. louis this morning. dell reporting quarterly results after the bell tonight. michael dell also agreed to take dell private and sell the pcmaker to a consortium led by himself, microsoft and silver lake partners. get a preview from morningstar equity analyst carl lampier. good morning. did i get that right? call on your last name? >> yes, that's correct. >> so what are we expecting this afternoon, and how much do we care actually about the earnings versus what we're going to be hearing about potentially about the deal to the extent we do? >> well, it's a valid question. i'm expecting probably around $14.1 billion in sales. probably highly would be the mobility segment. dell released the spx 12 convertible laptop and the sxs

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10 tablet which should probably appreciate sales because they got it out before the holiday. but that said, where and what they even decide to field, and what they say, it's really -- >> there's two big questions going on as far as i understand. one is do we believe, and there have been analysts out there who said it, that ultimately, the michael dell group is going to have to come up with more money. do you think that happens? >> well, clearly there are a good number of people that think that. dell's shares have been trading above the buyout price. but we don't think that. there's a couple of reasons. one, we don't see the shares going up because we don't see a new bidder coming in and bidding up the price. secondly we don't think that michael dell and silver lake are going to want to take on additional capital given the expensive costs if they don't absolutely have to. $15 has been thrown out there. but, there's no indication that that's going to materially increase the probability that the deal goes through. given the dissent.

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companies like southeastern putting $24 valuation. >> is this a good deal for shareholders? would shareholders be better off letting michael dell try to pursue whatever strategy he plans 20 do in private, to do it in public, and would shareholders be content with that? >> i think that shareholders are best off accepting the buyout price. we're maintaining our $14 value on dell. for a couple of reasons. one it really seems like this restructuring could best be done behind closed doors. there's a lot of difficult decisions to be made if the pc industry continues to deteriorate. there's a lot of investors that are going to say, you know, we maybe need to get rid of that segment. there's going to be pressure on the company to make short-term decisions that aren't necessarily in the long-term best interest. >> we think that the pc industry is going to continue to be a valuable touch point with customers. and that getting rid of it, just because of short-term margin concession would be a real

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mistake. that might be a result if it was to stay a public company. >> i want to talk to ken langone because he's making a face. >> what i don't understand is why cripple the balance sheet? why not just say we're going to aggressively buy back our shares over a period of time. as we generate cash flow. i mean, to me, those people who are discouraged by the business, that want to get out, they'll sell their stock. those people who say, you know what? home depot has gone from 2.5 shares down to 1.5 billion shares. >> you lived in the public spot light. you know, can you make transformational -- this is the ultimate sort of philosophical question about private equity. can you make the types of changes that people think thud be made behind closed doors, you know, on broadway? >> michael dell can't. why? because he has control of the company. if people don't like what he's doing this is why you have public markets. i'm out. i don't like what you do. when home depot is buying all these supply businesses and people didn't like it, they

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dumped the stock. frank blake comes in and says we're going to go right back to what we were and they're buying the stock. what i'm saying is the pub link markets work. what i -- this little company unifi i'm talking about we've been a $50 million buyback. we say as we generate cash we don't need we're going to buy the stock. why cripple the balance sheet? i mean it's a sad story about who just went bankrupt today? >> reader's digest. >> again. >> i mean, these things don't have to happen. >> right. >> you've got to have some patience though. >> okay we're going to leave the conversation there. we will watch for dell's earnings report this afternoon. >> thanks very much. >> thank you. appreciate it. >> the stock -- go up. >> there you go. >> i mean, it's -- it's nuts. >> yeah, and that's the second time in four second time in four years for reader's digest. >> yeah. it's sad. >> it is. we're going to continue this conversation and when we come back, we'll be kicking off the short trading week ahead. jim cramer is back from

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vacation. we'll get to talk to him, find some stocks to watch before the opening bell.

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welcome back to "squawk b " box." jim cramer joins us now from the

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new york stock exchange. i don't know what you did last week. i can only imagine. it's the life the rest of us dream about. were you reachable? were you on those things in sticks in borabora? >> though. i went to mexico, which i love. >> where did you go, jim? >> to a temple san miguel ciendae. it's fun there. >> what are you saying? >> audi is building a plan, bmw is building a plant, volkswagen. these are companies that recognize that it's cheaptory build there than in china. it's cheaptory bring them up there. it is going to work for the mexicans. >> i agree. i think that's win-win. over a period of time, we'll all do better with that kind of a treaty. >> jim, where are you on the minimum wage? i saw so much written over the weekend. it's hard to -- each side says

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that they've refuted the other side. >> i just want more hiring. and if this cuts hiring, that's a mistake. if the affordable care act cuts hiring, that's a mistake. this is a country where we're founded on the idea of creating jobs. by the way, can i just say i was with my doctor last week and we were -- >> he is mine, too. >> we were saying, ken, how good you are and how you never talk about it, but you probably create mob jors in the city with nyu than anyone. i saw you this morning. i was with the doctor and all we do is talk about all the things thaw talk about that we never talk about. >> this is a shrink? >> no. >> he's an internist? >> he's an internist. he's a lovely man. his dad, who is 94, is my dental consultant. he used to be my dentist and he goes to the dentist with me when i have my teeth taken care of. lovely family.

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>> ken, we were talking about do i have to switch my business to nyu because of what you've done -- >> yes. yes. >> and i think the answer is yes. >> by the way, let me correct you, jim. i didn't do it. bob grossman and an established team we have at the new york center have done it and think proved their mettle by what happened after sandy. >> good to see you. >> shrink. good guess. >> coming up, our guest hoes host this hour has been ken langone. we are going to get the very last word for him, coming up next. and don't mix squawk tomorrow morning. we have robert hook who will be our guest host. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines

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